Africa Registers The Fastest growing Economy ..., but

By Lewis Machipisa, IPS, 5 May 1999

ADDIS ABABA, May 5 (IPS) - Africa remains deeply entrenched in
poverty, although it registered the fastest growing economy than
any other region last year, according to a new report by the UN
Economic Commission for Africa (ECA).

The report, titled the 'Economic Report on Africa for 1999',
says the continent posted its fourth consecutive year of growth
at 3.3 percent, despite the global financial and currency
turmoil, exceeding the 2.9 percent rate in 1997 and population
growth rate of 2.8 percent per annum.

The world economy slumped to two percent growth in 1998 from
four percent in 1997.

Despite the good news, the report warns that Africa's
economic growth rate is not high enough, nor sufficiently broad-
based, or sustained long enough to make a real dent on poverty.

Unfortunately, the global and external shocks are not
changing in Africa's favour. Overseas development aid (oda) is
stagnant or declining, little has been done in reducing debt
burden while protectionistic tendencies continue in Africa's
major markets.

Given the global shaky financial sector and the possibility
of competing demands from the more important emerging markets
that may be threatened by instability, external resource inflows
to Africa, especially from the private sector, are likely to
remain low, the report notes.

External resource flows into Africa declined to three billion
U.S dollars from 4.5 billion in 1997 as a result of reduced
private inflows and bilateral credit. For sub-saharan countries,
net transfers declined by nearly 40 percent. Both domestic
investment and foreign direct investment (fdi) are relatively
low.

In 1997, fdi flow worldwide rose by 19 percent to reach 400
billion dollars U.S. dollars. Of this amount, developing
countries attracted 149 billion U.S. dollars. Fdi inflows to
Africa are estimated at 6.4 billion dollars, according to the
Geneva-based UN Conference on Trade and Development (UNCTAD).

"This is not the time to be reducing ODA," says Amoako.

FDI is needed as a non-debt creating form of resource inflow.
Yet FDI seems to be caught in a vicious circle since it requires
a hospitable economic environment and sustained high growth. At
the same time FDI is needed to help create that environment and
achieve that growth.

The ECA report has a new feature. Countries are ranked
according to annual performance, economic stability and economic
policy stance indices. Unlike in the past, performance over the
previous year and challenges facing African policy makers are
evaluated from the perspective of reducing poverty by half over
the next 15 years. Four out of 10 Africans live in absolute
poverty and recent evidence suggest that poverty is on the
increase.

Despite recent progress in economic policy reforms, most of
the countries on the continent lack the fundamentals for
sustained future growth.

Not surprisingly, the lowest scoring countries on all the
indices were those significantly impacted by civil conflict.

"Understanding the dimensions of poverty is essential for
constructing policies and programmes to reduce it," says
Amoako. "That is why measuring performance and sustainability
becomes vital."

"By understanding the depth and extent of poverty fully is
only a first step, a step necessary but not sufficient step, to
achieving poverty alleviation," he notes.

The Least Developed Countries (LDCs), 33 of them, increased
their GDP growth rate from 2.4 percent in 1997 to 4.1 percent.
Only two economies, the conflict engulfed Democratic Republic of
Congo (DRC) and Comoros had negative GDP growth in 1998 compared
to with four the previous year. But only three, Botswana,
Republic of Congo, Equatorial Guinea grew at seven percent or
more in 1998.

The report notes that while macroeconomic policies are
important and necessary for economic growth, and have spurred
the recent good performance across an impressive array of
African countries, they are by themselves inadequate to sustain
it.

The report concludes that as Africa enters the 21st century,
the long-term sustainability of economic and social progress of
many countries is best fraught with uncertainty. If Africa wants
to reduce poverty by half over the next decade and half, it
needs to attain and sustain an average growth rate of seven
percent per annum, an enormous task.

But even as the region basks in the limelight of being the
fastest growing economy, not all countries share the glory. Only
North and Central African sub-regions grew in 1998. There were
declines in the eastern, western sub-regions. Southern Africa
was basically unchanged.

"The two sub-regions in Africa where economic growth,
stability and prospects for development look very encouraging is
southern Africa and Northern Africa. Other sub-regions have a
lot more difficulties," Amoako told IPS.(END/IPS/lm/MN/99)

May not be reproduced, reprinted or posted to any system or
service outside of the APC networks, without specific
permission from IPS. This limitation includes distribution
via Usenet News, bulletin board systems, mailing lists,
print media and broadcast. For information about cross-
posting, send a message to <wdesk@ips.org>. For
information about print or broadcast reproduction please
contact the IPS coordinator at <online@ips.org>.